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Statutory legacy intestacy entitlement increases

The legislative rules that apply if a person dies without a Will, which set out who is responsible for the administration of their estate and who will inherit, are known as the rules of intestacy.

In England or Wales, the amount that the surviving spouse or civil partner can inherit under intestacy rules – the statutory legacy – has been increased from July 2023.

Under the Administration of Estates Act 1925 (Fixed Net Sum) Order 2023, the UK government has raised the statutory legacy sum
from £270,000 to £322,000.

The previous sum was set at the start of 2020 and would usually be due for review in five years, but this period can be overridden by inflation increases of 15% or more.

This means that the uplift applied from 26th July 2023
is actually several months late, and the government’s failure to keep up with the consumer price index in this regard could mean some inheritors would have lost out on thousands of pounds.

What is the statutory legacy for intestacy?

When someone dies without a legally valid Will, this is called dying intestate. Intestacy occurs when the deceased person’s assets cannot be clearly allocated.

It’s also possible for a person to die partially intestate if they have a Will that doesn’t account for certain eventualities, such as the intended beneficiary passing away first.

In cases like these, intestacy laws must be followed, which can be complicated and inflexible, and may not align with what the deceased would have wanted.

If the individual is survived by a spouse and children and did not leave a Will, they will be entitled to the statutory legacy. The spouse can directly claim their deceased partner’s personal effects and now up to £322,000 of their estate value.

It’s commonly believed that spouses inherit everything if their partner dies, but this isn’t always the case with intestacy rules. The spouse or civil partner will only be the sole beneficiary if the deceased did not have children.

If the deceased had children, 50% of the remainder of the estate (if any) above the statutory legacy amount also goes to the spouse and the remaining 50% will be divided equally between the children or their descendants.

The deceased’s children would inherit equal shares of the entire estate if the individual died without a spouse or civil partner. In all cases, if any of the children are under 18 years old, their share will be held in a Trust until they turn 18.

A provision for adopted children allows them to benefit from the estates of their adopted parents, but not the estates of their biological families. There are no provisions for the parents or siblings of anyone who dies intestate with a spouse and no children.

Why is it important to leave a will?

The statutory legacy increase will help the spouses of those who pass away intestate after 26th July this year, but having a Will means that your loved ones won’t have to rely on intestacy rules and any other changes that may be enforced in the future.

If you leave the distribution of your estate to the government, there are only certain circumstances that allow particular relatives to be beneficiaries, leaving nothing for other close relations. This means those not in a marriage or civil partnership – such as ‘common law’ partners and cohabiting couples – will not benefit from the statutory legacy.

Formalising your personal wishes in a Will gives you the choice to specify who should be entitled to your estate, including which elements and to which extent. This provides flexibility to divide assets amongst all your loved ones, including non-family members, who otherwise wouldn’t benefit under intestacy law.

When you create your Will, you can choose who to appoint as executors of your estate, speeding up the administration process and easing the burden on your family. In the case of intestacy, you and your family would have no control over the appointed administrators, who are unlikely to operate with your wishes in mind.

The intestacy rules also do not cater for care provisions for children under 18 – so, if you would prefer for specific guardians to take over parental responsibilities in the event of your death, you must write this into a Will.

Nobody knows what will happen in the future, so it’s essential that you don’t take anything for granted and expect your estate to be distributed a certain way upon your death without preparing a valid Will.

How will the statutory legacy change affect you?

The old intestacy rules will continue to apply to deaths occurring before 26th July 2023, while the higher statutory legacy entitlement will apply to deaths on or after this date. You can use the government’s online tool to check who inherits if someone dies without a Will in your circumstances.

As discussed above, the rules of intestacy don’t always reflect modern relationships and family arrangements, with the assets of those who die intestate potentially being distributed to people they wouldn’t have named as beneficiaries and/or incurring a more complicated Inheritance Tax bill.

The best way to ensure that your estate benefits the people who you want to inherit it, in the ways you prefer, and to minimise their tax burden, is to write a Will with the aid of professional tax-efficient planning. You may also want to hire a financial advisor to manage assets in a Trust.

At gbac, we have a team of accountants in Barnsley who could assist your estate management with tax planning and probate services. Get in touch by calling 01226 298 298 to arrange a consultation, or email any queries to info@gbac.co.uk.